Deficit
ISLAMABAD: In September, Pakistan’s current account deficit shrank to a mere $8 million, marking a remarkable 98% reduction from the previous year.
This development was attributed to increased remittances from overseas Pakistanis and reduced imports.
Comparing to September 2022, when Pakistan recorded a $360 million deficit, this year’s September figures show a 95% month-on-month decline. In August, the shortfall stood at $164 million.
Despite the nominal current account deficit, experts had anticipated a surplus in the country’s external balance.
Fahad Rauf, the head of research at Ismail Iqbal Securities, stated, “The improvement (in the current account deficit) has come mainly due to higher remittances and lower imports.”
He also mentioned that remittances are expected to further increase in October, given the resolution of issues between the open market and interbank rates.
Rauf added, “We expect the current account deficit to remain low and might even turn into a surplus in October.”
In September, Pakistan’s trade deficit contracted by 46.85%, amounting to $1.518 billion, compared to the $2.856 billion registered in the previous year.
According to SBP data, Pakistan’s total imports for September decreased by 19% year-on-year to $4 billion and by 7% on a monthly basis.
Total exports saw a slight improvement, increasing by 2% from September last year to reach $2.474 billion, compared to $2.437 billion. On a month-on-month basis, September’s exports also increased by 2%.
Remittances in September reached $2.2 billion, up from $2.5 billion the previous month, marking an 11% increase compared to the same month the previous year.
In the first quarter of this fiscal year, Pakistan recorded a current account deficit of $947 million, which is 58% lower than the same period the previous year.
Meanwhile, Pakistan is set to receive $500 million from China, in a deal that excludes any rollover agreements.
The development surfaced in a meeting of Pakistan’s Caretaker Prime Minister Anwaarul Haq Kakar and Chinese President Xi Jinping in Beijing. This meeting took place on the sidelines of the 3rd Belt and Road Forum.
The aforesaid inflow will help SBP reserves to cross the $8 billion mark, according to Mettis Global.
To recall, China rolled over a principal amount of $2.4bn loan to Pakistan for a period of two years, in order to foreign reserves on the back of an IMF deal which helped it avert a default.
At present, total foreign exchange reserves held by the State Bank of Pakistan (SBP) rose by $67.3mn or 0.88% WoW to $7.71bn during the week ended on October 13, 2023, according to the data released by the central bank on Thursday.
On the other hand, the country’s total reserves diminished by $117.2m or 0.9% WoW to $12.91bn.
During today’s meeting, both countries discussed various dimensions of the multi-faceted Pakistan-China relationship and reaffirmed our longstanding and steadfast friendship, all-weather strategic cooperation, economic and trade ties, and CPEC.
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